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Helping family business clients spot the potholes

Robert Powell FCA, the 2018 Family Business Australia Accredited Adviser of the Year, shares some pluses and pitfalls for CAs advising family businesses.

In Brief

Robert Powell FCA was named Accredited Adviser of the Year 2018 by Family Business Australia.

He says CAs need more than technical accounting expertise to best service these clients, as emotion is a powerful force in family businesses.

Powell suggests CAs take a wholly client-centric approach to family firms, and be willing to pull in external experts if needed.

By Jo McKinnon

Clients in family firms can bring up complex and conflicting problems that need special skills to deal with, according to the Family Business Australia’s Accredited Adviser of the Year, Robert Powell FCA.

Powell won the award on 11 September 2018, with the judges praising his decades of high-quality service to family-run enterprises. But the private advisory partner at Grant Thornton’s Sydney office readily admits he wasn’t always as good an adviser as he is now.

It was about 15 years ago, after seeing a client’s business fracture, that he decided “I should do better”.

“My clients were a family business that went through a big bust-up. It cost them an awful lot of money to resolve the issues, and ended up with one part of the family disconnected from the other.

“A lot of the situation was due to communication breakdown, but in a family business you also need to try to see the potholes in the road ahead. They hadn’t looked at the potholes.”

The experience made him realise that to best service his clients, he needed more than technical accounting expertise. So he undertook courses at Family Business Australia (FBA) to gain more skills in family business governance and succession planning; he also put his clients in touch with FBA.

In 2008, Powell became one of FBA’s first accredited advisers. He has been an FBA NSW and ACT committee member since 2016, and was a founding member of the Australian Taxation Office’s tax practitioner SME working group. He also gained qualifications from the Family Firm Institute, the peak body worldwide representing family business advisory professionals.

Powell has now been a family business and succession planning specialist for more than 30 years. His clients include owners of air-conditioning business ActronAir, the Mundy family, for whom he conducted a strategic review and developed a succession plan.

He has also worked with the owners of the Blue Mountain’s Scenic World, the Hammon family, for two decades, facilitating family meetings with four generations ranging in age from 12 to 84.

The award judges praised Powell for demonstrating significant, sustained and high-quality service to family enterprises, and contributing to the FBA’s objectives to educate and develop opportunities for families in business.

“In a family business, you need to try to see the potholes in the road ahead.”
Robert Powell FCA

What’s different about advising a family business?

About 70% of businesses in Australia are run by families. So what’s different about advising family business clients?

“It’s definitely more complicated,” says Powell. “When there is no family involved, you can just look at the data and make a decision that’s completely commercial. But when you’re dealing with a family business, there is this third element of emotion. It can be emotion, family loyalty or nepotism. It’s a mistake to ignore all that when you’re advising a family business on what course to take.

“You can’t hire and fire people in the same way, for example. If you feel you have to fire your cousin, that can make for a very awkward Christmas lunch that year.”

He also flags the lack of formal professional development for family members in a business. “With family members, it’s assumed they know everything, when they don’t.”

He says there should be tailored development programs for these individuals in management skills, governance and other issues.

“With family businesses, you also need to know how to go about handling the soft issues.”
Robert Powell FCA

What can help CAs with family business advisory?

Powell emphasises more education as the best path for CAs who want to do a better job helping their clients in family enterprises.

“You need to get training over and above what you need as a technical expert. With family businesses, you also need to know how to go about handling the soft issues,” he says.

And he strongly advises CAs to think of themselves as part of a multidisciplinary team.

“You need to take a completely client-centric approach, and realise that not every accounting firm has all the skill sets for all the advice needed for the family business. You should be prepared to bring in someone from outside the firm if you need to,” he says.

“Don’t think you have to be able to give advice on absolutely every aspect. Don’t try to be a bush lawyer. You might stray into areas where you’re not qualified to give advice.”

And his final tip? “People think that in a family business you don’t need to write things down, but I’ve found the opposite is true.”

Tips for success in a family business

Communicate, communicate, communicate. There needs to be a safe place where family members can ask questions. Regular family meetings with pre-agreed agendas can help, particularly if they are facilitated by an experienced, independent adviser.

Family disputes are probably inevitable, but the impact can be reduced by pre-agreeing on an approach to common sticking points, such as employment of family members or selection of leadership. Best practice is to document these agreed family policies in a Family Constitution.

Families in business need to try to understand their shared values, which can provide a north star to steer by when tough decisions have to be made. Understanding what they stand for as a family can be critical to survival.

Plan early for the incumbent generation to have something to move on to, otherwise they will keep limiting the pathway for the next generation. Be aware that this can be a difficult process, especially when a firm’s founders are involved, as the reason they started the business in the first place was because they wanted the freedom to do it their way.